J.P. Morgan: Orient Cables (603606.SS) — How Much Geopolitical Risk Is Priced Into the 8% Decline?
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J.P. Morgan maintains an Overweight rating on Orient Cables (603606.SS) with a target price of RMB 68, despite an 8% share price decline triggered by reports that the UK government blocked MingYang Smart Energy from building a factory in Scotland on national security grounds. The broader Shanghai Composite fell only 1% over the same period.
The sell-off reflects heightened geopolitical concerns for Chinese offshore wind equipment manufacturers exposed to the UK market. Orient Cables holds existing UK submarine cable orders and faces potential delivery disruptions or future order losses. As of October 23, 2025, the company's total submarine cable order backlog stood at RMB 11.7 billion, with approximately RMB 2 billion—roughly 17%—from the UK. Submarine cables contribute an estimated 70% of gross profit.
Based on a proportional analysis, J.P. Morgan estimates the market has already priced in approximately a 65% probability of a UK ban on Orient Cables. Unlike wind turbines, where European supply is ample, the EU faces a submarine cable supply shortage, which limits the downside risk. Furthermore, domestic Chinese offshore wind demand alone remains sufficiently robust to drive long-term value creation.
The valuation is based on 19 times 12-month forward price-to-earnings, consistent with the three-year historical average. Key downside risks include slower offshore wind development, excess capacity, and unfavorable average selling prices.